Changing the Business Model

Tim O'Reilly presented the perspective of a copyright holder and a content owner. He asked what happens to all of the good content that can't be read because it just isn't available. A few thousand of the one hundred thousand books published each year have significant sales. The rest of them might sit on the shelf for three months and then what? The publisher doesn't return the rights to the author, so the book doesn't make it back into the public domain. O'Reilly suggested that for many of the books that disappear into oblivion, piracy would have been a blessing.

In his keynote earlier in the day, O'Reilly had explained that, "Piracy is progressive taxation. If no one cares about you then they won't pirate you. How do you know to look for someone unless you're well known. It's a tax on the most successful content providers." He polled the audience to see how many used free television and how many used cable. He then asked how many people paid for an ISP (Internet service provider) and how many created their own network connection. He said that this showed that many consumers will choose a compelling service that is reasonably priced over one that is free and ad hoc."

Online piracy changes the notion of who's a publisher. O'Reilly reminded the audience that in the early days of the Web there was an idea that everyone would be a publisher or a content provider. Everyone would put up their own Web page. But how do you find the information you want? You go to Google or portal sites or big sites that have the information you want. O'Reilly explained that "The Web publishers are the ones who manage to accumulate eyeballs. A publisher is an aggregator."

Using a book analogy, O'Reilly said that there are plenty of potential authors and plenty of potential readers. You can't just hope that they'll find each other. Book stores and libraries aggregate customers while the publishers aggregate authors. Instead of trying to hold onto their current model, Hollywood and the music industry could reposition themselves as publishers. So long as we can keep the entertainment industries' suggested restrictions from being hard-coded into law, O'Reilly thinks that eventually the providers will understand how to give consumers what they want.

Hollywood's Nightmare Device

Victor Nemecheck is director of marketing for El Gato, the company that makes the EyeTV Digital Video Recorder. Victor's bio in the program highlights the core issue: EyeTV [allows] Macintosh customers to watch, record, and pause "live" TV, skip commercials, instant replay, or archive shows. In some ways, this is a natural extension of the VCR offerings that the entertainment industry unsuccessfully fought 20 years ago. You can see why the entertainment industry might feel threatened by such devices. The answer isn't to stop innovation but to change its business model.

Nemecheck said that their team discussed carefully whether they should produce such a product. Their concern was that a movie studio could hire lawyers and shut them down. The EyeTV was released in July and the response has been great. Although people could use the EyeTV to break laws, most people are using it for legitimate purposes. People are recording televisions shows and watching it when it's convenient to them. They've also heard from kids who play PlayStation and are using EyeTV to record their games and go back and watch them again--some parts in slow motion.

Nemecheck was later asked what is considered piracy with a television show. He answered that it clearly would be illegal to record a program and package it and sell it. On the other hand, recording and giving it to someone else isn't illegal. Moderator Gillmor added that if it's illegal to copy a show and give it to someone else, he'll miss all of the "West Wing" this fall because he'll be in Hong Kong. He announced that "my brother is taping them for me--so sue me." O'Reilly added that television isn't necessarily just supported by commercials. HBO is supported by subscriptions and by selling its shows on DVDs at video outlets. He advised the entertainment industry to "move forward and seize the opportunities and not try to maintain the past." In response to another question, Nemecheck said "we have not heard from lawyers yet--and that surprises us in a way."

Taking Action

Cory Doctorow, Outreach Coordinator of the Electronic Frontier Foundation, began his presentation by asking if people who skip commercials are thieves. His organization is involved in lobbying politicians and bringing law suits to highlight the legal issues in the digital rights management arguments. He worries that if the entertainment industry succeeds, it will be the death of technology.

Doctorow explained that the reason that Hollywood has such leverage is that by 2006 America wants to have digital television. A strong motivator for this is the revenues that are available by selling the current broadcasting spectrum. According to Doctorow, "Hollywood says we're not going to make our movies available to digital TV unless you can let us determine which technologies can be in any box that can touch the signal."

If this restriction is legislated then computer companies won't be able to include technologies such as EyeTV that your customers might want unless Hollywood approves them. Not only that, but the devices will need to call to check if they are still compliant. If you build in a capability that is later banned it could be remotely disabled. In addition, because open source technology can't be controlled, it will also be banned from these devices.

Doctorow was asked what we should be doing. His advice was that you should tell three friends about what is going on. Too many technologists aren't aware of the issues. He said that when the entertainment industry tried to block VCRs, the VCR technology companies stood up. The difference now is that technology companies don't understand the threat and are, by and large, going along with this legislation. He advised that when technologists, a 600 billion dollar industry, go on the offensive against Hollywood, a 35 billion dollar industry, technologists win.

Daniel H. Steinberg
is the editor for the new series of Mac Developer titles for the Pragmatic Programmers. He writes feature articles for Apple's ADC web site and is a regular contributor to Mac Devcenter. He has presented at Apple's Worldwide Developer Conference, MacWorld, MacHack and other Mac developer conferences.